Finance

• Japan: Here Comes the "V"

  I received a call from a friend in Osaka last night. It was scratchy, kept cutting in and out, and was barely comprehensible. There are so many companies attempting to track down alternative sources of parts in Japan these days that a lot of traffic is being routed away from satellites to the old trans Pacific undersea cables, which are normally used for large data transfers. Osaka was packed with refugees from Tokyo. Anyone with relatives in this massive city 300 miles west of Tokyo had moved for the duration, at least until the nuclear thing blew over. Tokyo water…

• Global Shipping Industry the Latest Casualty of Japans Nuclear Disaster

  Radiation fears have begun to play havoc with the global shipping industry, in which Japan is a key player on several levels. Fearing the potential impact on crews, cargo and vessels worth tens of millions of dollars, some of the world’s biggest container shipping lines have restricted or barred their ships from calling on ports in Tokyo Bay over concerns about radiation from the damaged Fukushima Daiichi nuclear power plant. Meantime, ports in China are starting to require strict radiation checks on ships arriving from Japan. And in California on Friday, the first ship to reach the Port of Long…

• State Led Corruption in Russia

  The highly publicized cases of Sergei Magnitsky -- a 37-year-old lawyer who died in pretrial detention in November 2009 after exposing a multimillion-dollar fraud against the Russian taxpayer -- and Mikhail Khodorkovsky, the jailed business magnate who was sentenced at the end of 2010 to remain in prison through 2017, have again put the international spotlight on corruption in the Russian state. By the time of his death, the ailing Magnitsky had been complaining for weeks that he was being denied adequate medical treatment for acute stomach pain. The subsequent inquiry into his demise represented a serious miscarriage of justice.…

• Hedge Funds are About to Undress

  The July 21 deadline for the hedge funds to register required by the one year anniversary of the Dodd-Frank bill is fast approaching, and the industry is roiling with turmoil. The net result for the rest of us could be shrinking market liquidity and falling asset prices as hundreds of funds shut down or move overseas rather than meet the new, onerous disclosure requirements and the vastly increased legal liabilities they imply. The new regulations raise the level of disclosure virtually to the same level already demanded by your garden variety, plain vanilla mutual fund. Details will have to be…

• Japanese Reconstruction Investment Opportunities

  As destructive as the Japanese tsunami has been, it may have left some investment pearls in its wake. It has suddenly made available some of the country’s best of breed, world beating companies available at throw away prices. But this is going to be an investment for longer term money, not a trade, as some patience may be required for a payday. There is no doubt that the economy has suffered a body blow. I believe that quarterly GDP growth has swung from a 2% to a -3% rate, a flip of 5%. Electricity shortages are the biggest problem, followed…

• How US Job Losses Will End

  I am not in the habit of regularly lifting data out of the Wall Street Journal, but even a blind squirrel occasionally finds an acorn. I was tempted by the comparative Asian wage data they published, which I just have to get into my data base. Textile workers earn $2.99 an hour in India (PIN), $1.84 in China (FXI), and $0.49 in Vietnam (VNM). This is an 18 fold increase in labor costs from ten cents an hour since Chinese industrialization launched in 1978. This compares to the $8 an hour our much abused illegals get at sweat shops in…

• The Creation of Money from the Perspective of the Austrian School of Economics

  In the preface to his classic work “The Theory of Money and Credit”, Ludwig von Mises says: “Nevertheless, the problem of money has remained one of the darkest chapters in economics to this day”  . Unfortunately one has to admit the nothing much has changed. In the following we would therefore like to explain how and why money developed. Over the millennia people realised that an economy based on the division of labour yielded distinct material advantages due to the possibility to specialise. However, in order for individuals to survive in such an economy, they would have to resort to…

• Criticism of US Dollar Hegemony Getting Louder

  The performance of the US dollar constitutes a central determining factor for the development of the oil price. The criticism of the US dollar hegemony is getting louder on a daily basis. The Chinese rating agency Dagong Global Credit has recently downgraded the rating of the United States to AA. According to Dagong the quantitative easing has sustainably eroded the legitimacy of the US dollar as global reserve currency . The agency saw the USA as lacking in willingness to pay off its debt and accused it of being ignorant vis-à-vis its creditors. The following graph illustrates the fact that…

• Too Early to Estimate Economic Cost of Japanese Earthquake

  As Japan reels from the human catastrophe of the earthquake and tsunami that struck on Friday, the insurance industry said it is too early to estimate the economic losses. On Friday, Japan was struck by a massive earthquake, which triggered a devastating tsunami. Prime Minister Naoto Kan said that the country is facing its worst disaster since World War II and more than 10,000 are feared dead. On the first day of trading after the earthquake and tsunami, the Nikkei 225 closed at 9,620.49, a 6.18% drop. The Bank of Japan injected ¥15 trillion ($184 billion) into the money markets…

• Rampant Wage Inflation Strikes China

  I rely on hundreds of “moles” around the world whose job it is to watch a single, but important indicator for the world economy. One of them checks for me the want ads in the manufacturing mega city of Shensen, China, and what he told me last week was alarming. Wage demands by Chinese workers have been skyrocketing this year. The biggest increases have been at the low end of the spectrum, where migrant workers from the provinces are earning up to 40% more than a year ago. Wage settlements of 20% or more for trained workers are common. One…